Dollar General (DG) Q3 Earnings: What Awaits the Stock?

Dollar General DG, one of the largest discount retailers, is slated to report third-quarter fiscal 2016 results on Dec 1. The question in investors’ minds now is whether the company will be able to post a positive earnings surprise in the quarter to be reported. In the preceding quarter, Dollar General underperformed the Zacks Consensus Estimate by roughly 1%. In the trailing four quarters, it beat the Zacks Consensus Estimate by an average 3%. Let’s see how things are shaping up for this announcement.

Zacks Model Shows Unlikely Earnings Beat

Our proven model does not conclusively show that Dollar General is likely to beat earnings estimates this fiscal quarter. This is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Dollar General has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate stand at 93 cents. However, the company carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors Influencing this Quarter

We believe that Dollar General’s commitment to improve price management, merchandise, cost containment and operational initiatives is likely to favor results in the quarter to be reported. However, the company’s lower-than-expected sales in the last 12 quarters remain a matter of concern. Moreover, analysts expect margins to be under pressure by higher sales of lower margin carrying consumables. Soft comparable sales performance on account of deflation in retail food price across perishable items, fall in both SNAP participation rates and benefit levels, unseasonably mild spring weather along with stiff competition hurt Dollar General’s performance in second-quarter fiscal 2016.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

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